A Good Overview of the Economics of Mobile Phone Apps

by Jeremy Powers on June 25, 2010

I noticed a link over at Marginal Revolution I wanted to add some thoughts to. The link is to this blog post, “Full Analysis of iPhone Economics – it is bad news. And then it gets worse.” I have long wondered how even the most niche oriented small businesses could justify building i-phone apps, and now I know: they can’t. There appears to be a hysteria over apps, when, for local businesses especially, a billboard is faster, cheaper, and more effective at reaching your audience. (And no, in most cases, I am not a fan of billboards either.)

To quote the article:

“So now we know how much each average paid app earned. Now if we have the number of downloads at the medianpoint, we can calculate that number. And yes, there is that number, reported by Supercollider Blog on 2 February 2010. Remember the median has to be less than the average. How bad is bad? Supercollider Blog reports on several levels of paid app downloads, the relevant number is that half of all paid iPhone apps get less than 1,000 downloads. The median point is under 1,000. Lets call it 999. That number times $1.95 per paid app gives the ‘most typical app’ the total revenues in its lifetime – the full two years of App Store existence – of $1,948 dollars. This is before Apple takes its cut of 30%, so we are left with $1,363 over two years or $682 per year. This is so ‘successful’ that half of all of the developers of the 164,250 apps – will actually earn LESS THAN THIS.”

Emphasis in the original. If you have time, read the whole thing. For small businesses, spending any money on developing mobile apps is a waste. I wonder how many businesses have spent tens of thousands of dollars developing this type of media, while not even checking to see if Google Maps has the right address for their business. (One more aside, if your website has a “store finder” on it, please be sure you scrub it every month.) Always ask, WHY?